Global value chains, export, employment and productivity

The world production, trade and investment policies are organized around global value chains (GVCs) participation which refer to the international fragmentation of production. The international fragmentation of production is driven by technological progress, cost, access to resources and market channels. Although GVCs have become an important element in economic policy, not much is known about their impact on export, labor market and productivity. The aim of this thesis is therefore to examine the impact of GVCs on export performance, employment and labor productivity. Using the least squares dummy variable approach, the analysis is performed utilizing WIOD data for the period of 2000-2014 of 42 countries. The findings show that foreign value added enhances the export performance in the context of forward linkage and domestic value added. There is a complementary relationship between the performance of the export and imported input with high technology and competitive prices. In addition, GVCs participation increases labor productivity and employment. Whereas, GVC participation has a negative effect on wages. The country-level analysis shows that GVC participation enhances productivity and employment in developed countries. It also increases labor productivity in developing countries. GVC participation contributes to the high value-added production by the developed countries pioneering innovation and technology process. The developing countries with low value-added production obtain cheap imported inputs, advanced knowledge and technology by means of GVC participation. The research findings suggest that the developing countries should implement education and investment policies in view of new technologies and production techniques so as to enable high value-added production, and increase productivity and employment.